Administrators have been appointed to run the newspaper. There is no explanation for the court's decision.
Zaman is closely linked to the Hizmet movement of influential US-based cleric Fethullah Gulen, a former Erdogan ally.
Turkey describes Hizmet as a "terrorist organization" aiming to overthrow the government. Many of its supporters have been arrested.
Mr Erdogan's government has come under increasing international criticism over its treatment of journalists.
- Turkey ranks 149th amongst the 180 countries in the Reporters Without Borders' World Press Freedom Index 2015
- Media organizations in Turkey say that more than 30 journalists are currently behind bars
- Most are of Kurdish origin
- The government argues journalism in Turkey is among the most free in the world
It expressed "deep concern" at the latest court order - the culmination of pressure for more than two years on Turkey's "highest circulating newspaper, Zaman, and its sister publication Today's Zaman".
It said the pressure had been through "accreditation bans, tax inspections, meddling with its advertisers and threats to its readers".
Editor-in-chief Sevgi Akarcesme told Reuters news agency this was "the practical end of media freedom in Turkey".
"The media has always been under pressure, but it has never been so blatant," she said.
Dozens of supporters gathered outside the paper's Istanbul headquarters after the announcement of the court decision.
One held a placard saying, "We will fight for a free press."
Amnesty International's Andrew Gardner said: "By lashing out and seeking to rein in critical voices, President Erdogan's government is steamrolling over human rights.
"A free and independent media, together with the rule of law and independent judiciary, are the cornerstones of internationally guaranteed freedoms which are the right of everyone in Turkey," he said.